Book description
Credit is essential in the modern world and creates wealth, provided it is used wisely. The Global Credit Crisis during 2008/2009 has shown that sound understanding of underlying credit risk is crucial. If credit freezes, almost every activity in the economy is affected. The best way to utilize credit and get results is to understand credit risk.
Advanced Credit Risk Analysis and Management helps the reader to understand the various nuances of credit risk. It discusses various techniques to measure, analyze and manage credit risk for both lenders and borrowers. The book begins by defining what credit is and its advantages and disadvantages, the causes of credit risk, a brief historical overview of credit risk analysis and the strategic importance of credit risk in institutions that rely on claims or debtors. The book then details various techniques to study the entity level credit risks, including portfolio level credit risks.
Authored by a credit expert with two decades of experience in corporate finance and corporate credit risk, the book discusses the macroeconomic, industry and financial analysis for the study of credit risk. It covers credit risk grading and explains concepts including PD, EAD and LGD. It also highlights the distinction with equity risks and touches on credit risk pricing and the importance of credit risk in Basel Accords I, II and III. The two most common credit risks, project finance credit risk and working capital credit risk, are covered in detail with illustrations. The role of diversification and credit derivatives in credit portfolio management is considered. It also reflects on how the credit crisis develops in an economy by referring to the bubble formation. The book links with the 2008/2009 credit crisis and carries out an interesting discussion on how the credit crisis may have been avoided by following the fundamentals or principles of credit risk analysis and management.
The book is essential for both lenders and borrowers. Containing case studies adapted from real life examples and exercises, this important text is practical, topical and challenging. It is useful for a wide spectrum of academics and practitioners in credit risk and anyone interested in commercial and corporate credit and related products.
Table of contents
- Cover
- Series
- Title Page
- Copyright
- Preface
-
Part I: Introduction
- Chapter 1: Credit Basics
- Chapter 2: Essentials of Credit Risk Analysis
-
Chapter 3: Credit Risk Management
- 3.1 STRATEGIC POSITION OF CREDIT RISK MANAGEMENT
- 3.2 CREDIT RISK MANAGEMENT CONTEXT
- 3.3 CREDIT RISK MANAGEMENT OBJECTIVES
- 3.4 CREDIT RISK MANAGEMENT STRUCTURE
- 3.5 CREDIT RISK CULTURE
- 3.6 CREDIT RISK APPETITE
- 3.7 CREDIT RISK MANAGEMENT IN NON-FINANCIAL FIRMS
- 3.8 CREDIT RISK MANAGEMENT IN FINANCIAL INTERMEDIARIES
- QUESTIONS/EXERCISES
-
Part II: Firm (or) Obligor Credit Risk
- Chapter 4: Fundamental Firm/Obligor-Level Risks
-
Chapter 5: External Risks
- 5.1 BUSINESS CYCLE
- 5.2 ECONOMIC CONDITIONS
- 5.3 INFLATION AND DEFLATION
- 5.4 BALANCE OF PAYMENTS AND EXCHANGE RATES
- 5.5 POLITICAL
- 5.6 FISCAL POLICY
- 5.7 MONETARY POLICY
- 5.8 DEMOGRAPHIC FACTORS
- 5.9 REGULATORY FRAMEWORK
- 5.10 TECHNOLOGY
- 5.11 ENVIRONMENT ISSUES
- 5.12 INTERNATIONAL DEVELOPMENTS
- 5.13 OTHERS
- 5.14 MONITORING EXTERNAL RISKS
- QUESTIONS/EXERCISES
-
Chapter 6: Industry Risks
- 6.1 UNDERSTANDING OBLIGOR'S INDUSTRY OR MARKET
- 6.2 TYPES OF INDUSTRY RISKS
- 6.3 INDUSTRY LIFE CYCLE
- 6.4 PERMANENCE OF INDUSTRY
- 6.5 GOVERNMENT SUPPORT
- 6.6 INDUSTRY AND FACTORS OF PRODUCTION
- 6.7 INDUSTRY AND BUSINESS CYCLES
- 6.8 INDUSTRY PROFITABILITY
- 6.9 COMPETITOR/PEER GROUP ANALYSIS
- QUESTIONS/EXERCISES
- Chapter 7: Entity-Level Risks
- Chapter 8: Financial Risks
- Chapter 9: Integrated View of Firm-Level Risks
- Chapter 10: Credit Rating and Probability of Default
-
Part III: Credit Risks – Project and Working Capital
- Chapter 11: Credit Risks in Project Finance
-
Chapter 12: Credit Risks in Working Capital
- 12.1 DEFINITION OF WORKING CAPITAL
- 12.2 ASSESSING WORKING CAPITAL THROUGH THE BALANCE SHEET
- 12.3 WORKING CAPITAL RATIOS
- 12.4 WORKING CAPITAL CYCLE
- 12.5 WORKING CAPITAL VS. FIXED CAPITAL
- 12.6 WORKING CAPITAL BEHAVIOUR
- 12.7 WORKING CAPITAL, PROFITABILITY AND CASH FLOWS
- 12.8 WORKING CAPITAL RISKS
- 12.9 IMPACT OF WORKING CAPITAL RISKS
- 12.10 WORKING CAPITAL RISK MITIGANTS
- 12.11 WORKING CAPITAL FINANCING
- QUESTIONS/EXERCISES
- Part IV: Credit Portfolio Risks
-
Part V: Portfolio Risk Mitigants
- Chapter 17: Credit Risk Diversification
- Chapter 18: Trading of Credit Assets
-
Chapter 19: Credit Derivatives
- 19.1 MEANING OF A CREDIT DERIVATIVE
- 19.2 CREDIT DEFAULT SWAP (CDS)
- 19.3 TOTAL RETURN SWAP
- 19.4 CREDIT OPTION (CO)
- 19.5 CREDIT SPREAD OPTIONS (CSO)
- 19.6 CREDIT DERIVATIVE LINKED STRUCTURES
- 19.7 FUTURE OF CREDIT DERIVATIVES
- 19.8 CREDIT DERIVATIVES AND OVER-THE-COUNTER (OTC) MARKETS
- QUESTIONS/EXERCISES
- Part VI: Credit Risk Pricing
- Part VII: The Last Line of Defence — Security
-
Part VIII: Credit Crisis
- Chapter 24: Road to Credit Crisis
-
Chapter 25: 2008 Credit Crisis
- 25.1 CREDIT ASSET – PRIME VS. SUB-PRIME
- 25.2 SECURITIZATION
- 25.3 US HOUSING BUBBLE4
- 25.4 ROLE OF OTC DERIVATIVES
- 25.5 ROLE OF RATING AGENCIES
- 25.6 WHY DID THE BUBBLE BURST?
- 25.7 CONSEQUENCES
- 25.8 IMPACT OF THE LEHMAN COLLAPSE
- 25.9 HOUSING CRISIS TO CREDIT CRISIS TO ECONOMIC CRISIS
- 25.10 COMMON FACTORS 1929 vs. 2009
- 25.11 LESSONS OF THE 2008 CREDIT CRISIS
- QUESTIONS/EXERCISES
- Bibliography
- Index
Product information
- Title: Advanced Credit Risk Analysis and Management
- Author(s):
- Release date: June 2013
- Publisher(s): Wiley
- ISBN: 9781118604915
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